21 September 2012

Car Hire Insurance from the American viewpoint

American personal car insurance is often transferred to cover short term car hire. Additional rental car insurance can be worthwhile to cover the gaps.

Divided by the same language as we are, it is sometimes interesting to view a subject from a different perspective.

In America car insurance is easy and cheap to transfer for short periods. It has become normal practice for Americans to transfer cover from their personal car to a rental car. Additional rental car insurance is often viewed with suspicion and as an unnecessary expense.

Additional insurance still has it's place though.

The American attitude to freedom of choice has influenced the amount of "third party” cover you must have by law. It varies from state to state so a policy written for one state could have liability limits too low for another. The driver could then be charged for not being properly insured.

The state minimum limits for liability are very low so any serious injury would far exceed the state minimum liability limits. For example the limits for California are 15/30/15, meaning up to $15,000 cover for each person injured; up to $30,000 for all people injured; and $15,000 for property damage. This obviously doesn't go far in a country where a broken bone can cost $100,000 to treat.

Another reason to buy rental car insurance is that the policies have been written to cover risks that you wouldn't necessarily think about or expect to have in your personal car insurance.

One example of this is "loss of use”. If you have an accident in their car, the rental firm won't be able to supply it to the next customer. To protect their interests, they add a "loss of use” clause to the contract. This means the rental firm can claim back their losses from you until the car is repaired.

Cover for damage to tyres, wheels, underbody and glass is included in most car hire insurance. The more comprehensive policies include cover for misfuelling, lost keys, breakdown towing and recovery.

In the UK, it is assumed that you will not transfer insurance from your car to the hire car. Insurance is included in the cost of hiring the car and third party liability cover is a minimum of £1m. Collision damage waiver (CDW) is also normally included meaning you won't get charged for having an accident. CDW policies normally have a large excess (sorry, deductible) making the renter liable for the first, say, £750 of damage. While the principal motivator for purchase of car hire insurance policies in the UK is to cover the CDW excess, the other benefits should not be overlooked.